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Greater Philadelphia Taps Marcellus Shale to Create New Manufacturing Opportunities

Greater Philadelphia energy companies are drawing on the Marcellus Shale natural gas deposit to expand the area's manufacturing potential and its energy industry.

By Gary Wollenhaupt on January 29, 2014

The Marcellus Shale Reserve, with its abundant yield of low-cost natural gas, is fueling deep investment from Greater Philadelphia energy companies. That investment, in turn, spells new success for the region’s manufacturing industry.

Pipeline to Prosperity

On the Pennsylvania-Delaware border, the repurposed Marcus Hook refinery is the terminus for Sunoco Logistics‘ new Mariner East pipeline. The pipeline is scheduled to begin transporting propane from the Marcellus Shale in the second half of 2014; ethane will follow in mid-2015. Full capacity is projected to be 70,000 barrels of natural gas liquids (NGLs) per day. NGLs are used throughout the economy as inputs in everything from feedstock for petrochemical plants to blends for vehicle fuel. 

“Other companies are looking to transport NGLs to the Gulf of Mexico, but we saw that there were potential outlets much closer, using our existing assets,” says Jeff Shields, Sunoco Logistics’ communications manager.

In addition to NGLs’ popularity in European markets, the company expects Marcellus ethane to prove useful to the manufacturing sector. NGLs are a building block for plastics, detergents and a variety of other products.

“We believe that a new hub at Marcus Hook to supply local, regional and export demand is very attractive to producers and to industrial customers,” Shields says. “The potential uses for NGLs give us confidence for manufacturing possibilities at Marcus Hook and the surrounding area.”

But Marcellus and market potential aren’t all that keep Sunoco Logistics bullish on Greater Philadelphia. Shields says that the area’s existing infrastructure – deep-water berths on the Delaware River, plus refineries, rail lines and interstate highways – are priceless assets. History and public support are important as well.

“With the energy industry’s long tradition in the Delaware Valley, there is a commitment from both business and government leaders to grow this sector and help us develop new commercial ventures related to Marcellus and other shale areas,” he says.

Refining Success

On the Schuylkill River, Philadelphia Energy Solutions is planning to incorporate Marcellus gas into operations at the company’s Girard Point and Point Breeze refineries, collectively known as the Philadelphia Refining Complex. At a capacity of 350,000 barrels per day, the complex is the Eastern Seaboard’s largest oil refining operation.

“We acquired the refineries because we felt we had a better model for how to run them, built around crude supply and being a merchant refiner, but that’s only step one,” says Philip Rinaldi, PES’ CEO. “Going forward, we see the Marcellus gas as a very cheap source of energy and of raw materials that can be converted into other, higher-value products.”

PES currently burns some Marcellus gas as fuel in the refineries. Next, the company plans to convert the gas into hydrogen for a mild hydro-cracker, which it will use to upgrade heavy fuel oil into market-quality diesel. Other potential projects include large-scale electricity generation and conversion of natural gas to agricultural chemicals.

To help foster the partnerships needed for such projects, the Greater Philadelphia Chamber of Commerce has organized the Greater Philadelphia Energy Action Team, chaired by Rinaldi. The team includes regional business and political leaders as well as CEOs from energy companies in the oil refining, chemical, utilities, pipeline and logistics sectors.

According to Rinaldi, Greater Philadelphia’s manufacturers will be able to develop their own new products by piggybacking on the development work the Greater Philadelphia Energy Action Team is doing now. He mentions feedstocks for chemical companies and polypropylene resin for automakers as likely options.

“This is just a remarkable moment in time, when a lot of things are coming together,” Rinaldi says. “One of the manifestations is the depth and breadth of political support that exists. The governor, the mayor, our congressmen: they all want Philadelphia to become a regional energy center. They’ve come together and are pushing in the same direction, and that’s huge.”

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